This article is part of a series in which OECD experts and thought leaders – from around the world and all parts of society – address the COVID-19 crisis, discussing and developing solutions now and for the future. It aims to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge. Opinions expressed do not necessarily represent the views of the OECD.
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The New Social Contract: Empowering individuals in a transitioning world, a global survey report published by Aegon in 2019, identifies people’s top four current life priorities as: being healthy and fit (62%), enjoying life (59%), planning for their financial future (49%), and focusing on family (45%). Since the end of last year, the entire world has been upended by COVID-19. The need for a social contract and solidarity among social partners has never been greater. Together with two of the co-authors on the report, Catherine Collinson, CEO and President of nonprofit Transamerica Institute in the United States, and Leandro Palmeira, Research Director at Instituto de Longevidade Mongeral Aegon in Brazil, I’d like to reflect on the survey’s findings amid the impact the COVID-19 crisis.
Mike: “I live in the Netherlands, where we have entered an ‘intelligent lockdown’ to slow the spread of the virus. This has meant that many companies are now under severe financial strain and struggling for their long-term survival. The knock-on effect is that many people have been laid off, others are worried about their future and the lucky among us are getting used to working at home.
Our survey results show that a third (32%) of people already say they feel stressed about their current financial situation at least once per week, and a quarter (24%) feel stressed about their long-term financial planning for retirement. Faced with additional worries about job security, people are going to feel more stress in the months to come. The self-employed and those without a fixed monthly income are especially vulnerable. At the best of times, it is difficult to balance spending on day-to-day expenses with saving for the future. If, like many people, you are currently in survival mode, the exercise of preparing a budget will help you understand what money will be coming in over the coming months so that you can prioritise your spending for now and in the future. Writing down your plan may not eliminate your stress but it will help you see what resources you have available so that you can take some action”.
Catherine: “In the United States, one of the most common ways for people to save for retirement is through employer-sponsored 401(K) plans. Through these plans, workers typically invest in a variety of funds that are susceptible to both positive and negative fluctuations in the financial markets. The COVID-19 crisis has resulted in extreme market volatility and steep declines in equity markets, which has translated to drops in retirement account balances.
Workers who are nearing retirement face many questions in light of any drops in the value of their savings: Should I work longer and delay retirement? How can I save and invest in such a way that can help ensure that my savings last for my lifetime? These are difficult questions to answer. Now that many of us are ‘sheltering at home’, it is a good time to talk with family members about financial matters and plans for the future. Given the complex nature of the financial markets, especially amid the COVID-19 crisis, it is also prudent to consult with a professional financial advisor, whether it be your employer’s retirement plan provider, a bank, brokerage firm or insurance company”.
Read the OECD's key policy response "Supporting the financial resilience of citizens throughout the COVID-19 crisis"
Leandro: “Brazil has a healthcare system that is public, free, and universally accessible, although inefficient due to management issues and budget constraints. COVID-19 is likely to put an even greater strain on it in the months to come. Almost two-thirds (65%) of Brazilians in our survey say that being healthy and fit is a current life priority and 50% say that declining physical health is a retirement concern. We know that life will not be the same after the pandemic and responsibilities will shift with many of us working longer than we may have planned. What are we doing to get through the next few weeks and months in order to stay healthy and active, and also look after our emotional health and well-being by staying connected with friends and family?
Under normal circumstances, I do my best to exercise most days and as a family, we are used to spending a lot of time enjoying the outdoors. At the moment, we are getting used to spending more time indoors and making up for exercising less by trying to focus on enhancing our existing healthy diet”.
Our reflections illustrate how deeply and abruptly COVID-19 has changed the way we live our lives and will have an economic impact that will be felt for years to come. It has highlighted vulnerabilities in our current social contract and also brought out the best in people: from neighbours who look out for one another to healthcare workers who have shown enormous dedication and self-sacrifice to keep us safe and well.
The economic impact of the government rescue programmes in many countries calls for a redistribution of resources. This will test the solidarity of our social contracts as more responsibility inevitably shifts to the individual to take care of themselves and their loved ones. The best way to ensure the solidarity in our system is to make sure that each of the social partners are empowered to shoulder the responsibilities placed upon them. Individuals, as one of the social partners, represent a vulnerable group – and that is why it is our mission to help people achieve a lifetime of financial security.
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